T/F

If you formed a portfolio that consisted of all stocks with betas less than 1.0, the portfolio could have a beta coefficient that is less than that of the security in the portfolio with the lowest beta.

The beta of an "average stock," or "the market," can change over time, sometimes drastically.

An increase in the use of leverage will not affect a company's beta.

The coefficient of variation, calculated as the standard deviation of expected returns divided by the expected return, is a standardized measure of the risk per unit of expected return.

A portfolio that consists of 40 stocks that are not highly correlated with "the market" will probably be less risky than a portfolio of 40 stocks that are highly correlated with the market, assuming the stocks all have the same standard deviations.

Market risk refers to the tendency of a stock to move with the general stock market. A stock with above-average market risk will tend to be more volatile than an average stock, and its beta will be greater than 1.0.

Since the market return represents the expected return on an average stock, the market return reflects a certain amount of risk. As a result, there exists a market risk premium, which is the amount over and above the risk-free rate, that is required to compensate stock investors for assuming an average amount of risk.

A firm can have a positive beta, even if the correlation between its returns and those of another firm is negative.

One stock has a beta of 1.2 and another has a beta of -0.6. The returns on the stock with the negative beta must have been negatively correlated with returns on most other stocks.

The CAPM is built on historic conditions, although in most cases we use expected future data in applying it.